Throughout the financial crisis I have seen nothing about the role of banks in creating our money supply. It is a very simple process yet many people who work for banks can’t believe it yet alone everyone else. (Google money creation and you will get numerous explanations including this one from Wikipediahttp://en.wikipedia.org/wiki/Money_creation

The important thing is that when banks make a loan they are creating money. Because banks are required to keep a small percentage of deposits on reserve (the fractional reserve system) when new money is added to the banking system the money creation is multiplied depending upon the reserve requirement. Central banks add new money to the system usually by buying government bonds.

All this means that banks are an essential part of our exchange of goods and services. Without them there would be no economy. It is not that some banks are too big to fail, it is that banks are too important to fail.

There has been a lot of talk recently about the power and the evil of bankers and attempts to increase regulation of the industry. It is clear that bankers are extremely powerful people and some are probably evil to varying degrees. However, I cannot see how we can hope to discuss, evaluate and even reform the banks if we don’t recognize and take into account their role in money creation.

I would also suggest there may be other ways of creating money but that is so radical as to be treasonous.

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Cover Notes

After my first family broke up I went to the University of British Columbia and did a degree in economics because I was intrigued by the way in which money is created and because I wanted to understand the dynamics of how we exchange goods and services.

I concluded economics is mostly about relationships and we should evaluate economic policies by how they contribute to good relationships.

We have two major economic problems with which we should be dealing. The first is that while we have lots of energy and mineral resources left on this planet, we have used up the most easily accessible. Those that are left require an excessive amount of energy to extract. The second major problem is that our so-called "market" economy is largely based on legislation which restricts competition and thus allows some people an unequal share of the agricultural surplus.

To deal with these problems we need to focus our economy on a policy of sharing in the same way that families and people in small-scale societies share their food. We also need a universal guaranteed income scheme AND a new way of creating money. This would be a tremendous transfer of decision-making power from governments and bankers to individuals.

In this book you will learn:

why the economic principles of marginal cost and the elasticity of the demand curve say it should be priced at 99 cents.

why relationships are an important part of economics.

what it takes to make a good relationship.

that our civilization is based upon a huge agricultural surplus which should be considered an inheritance to be shared equally by everyone.

how the financial and the physical aspects of the economy interact.

how money is created out of thin air and the problems this creates for our well being.

how we can finance a guaranteed annual income scheme.

how to become a part of the ten percent,

how not to become a slave.

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